JAPAN’S DECLINING POPULATION AND DEMOGRAPHIC CHALLENGES Rajaram Panda Introduction Japan is sitting on a demographic time bomb. As an inevitable consequence of modernisation fuelled by rapid economic growth during the post-War years, Japan has emerged as one the first few countries in Asia to face a new challenge of a declining population. This unprecedented population challenge threatens the nation fabric with serious social, economic and political consequences whose impact is going to be felt for many future generations. There have been several studies around the world on the issue of declining fertility of Japanese women, the real reason behind the declining trend in the nation’s population. Not only it is not at the replacement level, even the existing rate continues to show declining trend. This is the real worry and at the core of this challenge. The past and the present governments have taken several measures to correct this worrying trend but since birth or the issue of having or not having a child is an individual choice, no government measures howsoever attractive by offering incentives have been of any help to address this issue. Yet, new measures are being adopted with the hope to address the issue. Professor (Dr.) Panda is currently Indian Council for Cultural Relations India Chair Visiting Professor at Reitaku University, JAPAN. Disclaimer: The views expressed are author’s own and do not represent either of the ICCR or the Government of India. E-mail: [email protected] This essay is a summary of a Lecture delivered at the University of Sao Paulo, Brazil, on August 18, 2017. The author wishes to thank Reitaku University and Japan Foundation Sao Paulo office for support for this project. ©Fundação Japão em São Paulo 2017 1 Post-War situation Japan’s population scenario is directly linked with its progress to economic growth. In the immediate post-War years, Japan remained a relatively protected economy while benefiting from the liberalised external economies. Its liberalisation process was slow but soon fast- tracked when outside pressures, particularly from the US, built up. While fostering the modern economy, Japan benefited from a growing workforce from the post- war baby boom period, whose energy contributed to the economic growth. With support from the government and backed by a competent bureaucracy, Japan’s private sector performed impressively and was able to compete with the best in the world. Japan’s impressive economic performance that witnessed high growth led its manufacturing industry gradually to move up the value chain as it accrued capital and skilled workers. From labour-intensive industry such as textile that benefited from cheap labour available domestically in plenty, the economy moved up to more capital-intensive sectors such as steel and automobiles and further to highly skilled machinery and electronic manufacturing. The first major challenge came when the Plaza Accord of 1985 made the country’s exports less competitive as until then Japanese Yen was perceived as undervalued. The sustained high growth of the 1960s and 1970s unleashed by the Income Doubling Plan engineered by architect Okita Saburo left Japan flush with surplus capital that its exports had yielded and enabled Japan to rise up through the world’s GDP ranking from seventh place in 1960 to second place in 1990. While the economy continued to boom with multinational giants such as Honda, Toyota, Sony, Suzuki and others revolutionizing the global automobile and electronic markets, domestic economy remained sluggish. The focus shifted to transfer labour and capital-intensive industries to overseas locations and Japan started focusing on high-tech industries. However, agriculture sector remained protected, rendering it non- competitive. There are cultural as well as political reasons for such a policy. This is beyond the scope of this paper. Suffice to say is that Japanese government finds compelling reason to protect this sector even now as only 12 per cent of the country’s land is arable and fertile, the rest covering with mountains and therefore has to be retained. Japan soon found itself confronted with complaint from competing firms in Europe and the US that while it is benefiting from a liberal economy of the world, it maintains a number of non- tariff barriers, such as prohibitive regulations on foreign ownership of shares among Japanese companies. Thus Japan’s export economy became a victim of its own success when it was forced by its economic partners to impose voluntary export restraints and led to the Plaza Accord in 1985, which led to appreciate yen quickly, making Japanese exports uncompetitive. In the meantime, Japan had succeeded in spinning the web of international supply chains that has acquired the global norm today. Japan graduated from an export powerhouse to an investment powerhouse. This growth story had greatly impacted the population pyramid as the accumulation of wealth in the hands of the Japanese people had started to change their life style. Japan which had experienced a baby boom immediately after World War II, started facing demographic challenges as the country started showing declining trend in its population. In fact, compared to other Western countries, the population surge in Japan started earlier and ended sooner too. As a result, Japan today leads the world in demographic aging. Japan has now the peculiar distinction of having the world’s oldest population since 2005. The number of persons retiring from the workforce is faster than younger ones joining. In this new situation, a capital-heavy country Japan now finds itself confronting with this new challenge and seeks to find ways to come out from the sluggish economy. Japan now looks for ways to accommodate the seniors in the competitive environment in a new trade strategy, whose direction does not look promising. ©Fundação Japão em São Paulo 2017 2 Current Problem Broadly, Japan’s current problems are two-fold: rapidly aging population and declining population. Forces that are responsible for this are declining fertility rates and lengthening of life spans. A total fertility rate of 2.1 would keep a population stable, even without migration. Japan reached this level in 1960 and after the baby boom period, has been falling persistently below since 1975. The total fertility rate reached a low of 1.26 in 2005 but has risen to 1.44 at present, still not enough to arrest the declining trend. Child birth out of wedlock is stigmatised and therefore all babies are born within marriage only but the decline is a combination of delayed marriage, or not marrying at all, resulting in reduced fertility. Added to this problem is Japanese people are having a longer life span. According to World Bank data, Japanese women attained the longest life expectancy among 228 countries in 1982, and have held that position till today. As per past trend, a baby girl born in Japan in 2008 could expect to live till 86. The male counterparts too achieved the longest life distinction in 1974 and can expect to live till 79. Over the years, the average life expectancy has risen to be longer and is likely to rise further in the future. There is something peculiar in this trend, which demographers call a health-survival paradox: Men seem to be healthier than women, but they die younger. Women tend to survive even with poor health compared to men. This means delay in physical decline in the case of women. Women represent 86% of Japanese over 100. In 2007, there were more than 32,000 centenarians; by 2030, the projection is 10 times larger. This means more elderly women would be in need of assistance and medical care than elderly men. Dismal Projections In April 2017, a government-affiliated research institute in Japan made the projection that Japan’s population is expected to fall below 100 million in 2053 and further plunge to 88.08 million in 2065, marking a 30 per cent fall from the 2015 level of 127.09 million. This projection is a bit better because the earlier projection five years ago had estimated the population to have shrunk to 81 million in 2065. Though the revised estimate presents a better picture, the picture is grim over a longer period, with national population projected to plummet to just 51 million by 2115, or about 60 % of today’s total. The announcement by the Health, Labour and Welfare Ministry’s National Institute of Population and Social Security Research confirms that depopulation, which started in 2008 after Japan’s population peaked at 128.08 million, was to stay as years pass by. The Institute therefore urged the government to prepare for consequences in wide-ranging areas, including the pension and health care systems. The past trends and the policy measures thus far suggest that this fate is unlikely to be altered in a major way. As regards the average life expectancy, it would increase to 84.95 years for men and 91.35 years for women by 2065, from 80.75 years for men and 86.98 years for women in 2015. According to the latest estimate of the Institute, people 65 or older will account for 38.4 per cent of the total population in 2065, a rise from 26.6 per cent in 2015. As regards the nation’s total fertility rate, or the average number of children one woman is expected to give birth to in her lifetime, it would be 1.44 in 2065, slighter higher than 1.35 projected for 2065 in the previous 2015 estimates. It is projected to dip to 1.42 in 2024 before rising to 1.44 in 2065. This shows that the number of women in their 30s or 40s who get married or have babies would increase.